Posted June 22nd, 2026 in Top Stories, Legal Insights

Overtime Exceptions for Union Workforces: What Employers Should Know

Employers with a union workforce often ask whether their collective bargaining agreement can modify standard wage-and-hour requirements, such as overtime. While the answer is typically “no,” a recent Department of Labor Opinion Letter demonstrates two underused exceptions, often referred to as “annual guarantee” or “annual employment” arrangements.

The Opinion Letter

The Opinion Letter analyzes a workforce with fixed eight-hour shifts on a “four days on, two days off” schedule, working 32 hours over each six-day period. During negotiations, the employer and union considered adding a paid 15-minute roll call at the outset of each shift, intending to bring employees closer to 2,080 hours per year.

The DOL first confirmed that the roll calls constitute compensable hours worked. Although preliminary, they would be characterized as hours worked under the CBA, rendering them compensable. Turning to the primary question, the DOL reaffirmed that the parties may circumvent the standard over-40 overtime by explicitly establishing one of two structures in their CBA.

The Two Exempted Structures

Structure One:

• The employer must pay the employee overtime compensation for all hours worked over 12 in a day or over 56 in a week; and
• No employee may work more than 1,040 hours in any consecutive (rolling) 26-week period.

Structure Two:

• The CBA must specify the hourly rate;
• During a specified 52-week period, employees must be guaranteed between 1,840 hours (or not less than 46 weeks at the normal number of hours worked per week if not less than 30) and 2,080 hours at the specified rate;
• No employee may work more than 2,240 hours during the specified 52-week period; and
• The employer must pay employees overtime for all hours worked over the guaranteed number of hours that are also over 40 in a given workweek, and for all hours worked over 2,080 in the specified 52-week period.

Under either arrangement, if an employee works more than the maximum specified hours, the exemption is lost, and the employer must recalculate overtime for the entire period.

Takeaway

The Opinion Letter serves as an important reminder of overtime exemptions uniquely available to a union workforce. When properly structured, an “annual guarantee” may prove beneficial to management and labor alike.